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Downturn hits China’s manufacturing heartland

John Kemp Great Debate-- John Kemp is a Reuters columnist. The views expressed are his own --

The global slowdown is hitting China's modern manufacturing base in Guangdong province especially hard. Deputy governor Huang Longyun on Thursday warned a news conference "the situation is grim" and the manufacturing hub around Pearl River Delta is bearing the brunt of China's slowdown.

Guangdong's burgeoning factories have supplied most of the cheap manufactured items flooding world markets in the last five years. They have also been the source of most of the marginal demand for crude oil, refined products and other raw materials. The province's slowdown will therefore have profound effects on global markets and prices in 2009.

More than any other province, Guangdong has been a showcase for modernization and an export-led growth and development strategy. Its modern export-oriented factories, many organized as joint ventures with foreign companies, have given it some of the fastest growth rates in China.

Guangdong has consistently outperformed traditional industrial centres in the north-east around Heilongjiang, Jilin, Liaoning and Shandong. Central government leaders have urged the north-eastern provinces to follow the south's strategy: reform struggling industries focused on producing industrial materials and low value items for the domestic market, and re-orient them towards producing lighter, higher-value industrial products for export.